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The EMI remains below its long-run trend level of 54.0

The EMI remains below its long-run trend level of 54.0

Economic activity in the emerging markets recovered in October, according to the HSBC Emerging Markets Index (EMI). The index rose to 51.7, from 50.7 in September.

Employment in both the manufacturing and services sectors remains subdued despite the gains in output, and price pressures persist

Simon Williams,
HSBC Chief Economist, Middle East and North Africa

Both manufacturing and services activity registered stronger rates of expansion in October, reaching six and seven-month highs respectively. New business growth in the emerging markets accelerated at the strongest rate in seven months. This led to the first overall rise in employment in four months.

Despite these improvements, the EMI remains below its long-run trend level of 54.0. But the latest figure is an improvement on the third quarter which was an average of 50.3, the lowest of any quarter since 2009 during the global financial crisis.

Simon Williams, HSBC’s Chief Economist, Middle East and North Africa, said: “After a soft summer, there are some grounds for cheer in the October EMI which shows growth in emerging market activity at its highest level since March 2013. The aggregate measures of emerging market output, new business and employment all printed above 50 and showed significant month-on-month gains for the third month in succession, suggesting that the bounce-back in activity and confidence is gaining speed.”

Regional view

  • “Positive start to Q4, with broad-based output growth and contained prices. Order and employment recovery suggests momentum should be sustained”
    Pablo Goldberg
    Global Head of Emerging Markets Research
  • “Egypt finally stabilising, but recovery will be laboured. High-spending oil states of the Gulf still showing strong growth, little inflation”
    Simon Williams
    HSBC Chief Economist, Middle East and North Africa
  • “Asia bouncing into the fourth quarter. Even Indonesia picked up speed. But employment is mixed amid still wobbly confidence”
    Frederic Neumann
    Co-Head of Asian Economic Research
  • “Better Q4 start. Brazil and Mexico show mild industrial growth, but Mexican bounce looks more robust; Brazil strong on services”
    Andre Loes
    HSBC Chief Economist, Latin America
  • “Better outlook for the region. The new composite South Africa PMI™ also looks good but we feel comfortable only with Central and Eastern Europe’s recovery”
    Murat Ulgen
    HSBC Chief Economist, Central and Eastern Europe and sub-Saharan Africa

China recorded a stronger increase in output as new export orders rose at the fastest rate in 11 months. Of the other largest emerging economies, Russia and Brazil also posted increases in activity, but India registered a fourth successive monthly decline.

There was an improvement in operating conditions in South Africa, according to HSBC’s new Purchasing Managers’ Index™, which was launched this month.

The HSBC Emerging Market Future Output Index hit a seven-month high in October. The index measures the expectations of businesses for activity 12 months ahead. Optimism rose in Brazil, China and India, but fell in Russia.

Mr Williams said that although the October data was encouraging, fragilities remained. “Employment in both the manufacturing and services sectors remains subdued despite the gains in output, and price pressures persist. The pick-up in export orders, though of note, is patchy and looks lukewarm for this stage in the economic cycle.”

The EMI is based on national PMI™ surveys of about 8,000 firms across 17 emerging economies. A figure above 50 signals expansion, while below 50 shows contraction.

The figure is subject to one revision after its release.

HSBC EMI Composite Output Index compared with GDP from 2006 to 2013

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